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Question 1. (3 marks) Explain what is meant by operating and financial risk. Suppose that firm A has a greater operating risk than firm B.

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Question 1. (3 marks) Explain what is meant by operating and financial risk. Suppose that firm A has a greater operating risk than firm B. Is it true that firm A also has a higher cost of equity? Question 2. (3 marks) Why is the use of debt referred to as financial leverage

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